Life Insurance Words Mystify Consumers

Imagine you are a consumer who knows nothing about the life insurance industry. You are talking with an agent who is describing a life policy. The agent mentions the policy’s death benefit. What might you think the term “death benefit” means?

Researchers put that question to a test. They presented “death benefit” and several other commonly used life insurance terms to consumers and asked what those terms mean.

Or how about “cash value”? “The value of an item in cash,” came the answer. Another person said, “Amount it costs.”

A problem and an opportunity

All are examples of a problem and an opportunity facing the life insurance industry, according to speakers at the LIMRA 2014 Marketing & Research Conference, which is being held in Boston this week.

The problem is failure to use “authentic language” when communicating with consumers, said Maria Ferrante-Schepis in an interview in advance of a presentation on the subject. She is managing principal for Maddock Douglas, an innovation consulting firm based in Elmhurst, Ill. Her firm joined with LIMRA to conduct research on the topic.

The opportunity is the opening that exists for carriers to clear the path for more productive life insurance conversation and purchases through greater use of authentic language.

Authentic language goes beyond streamlining underwriting requirements and simplifying products, Ferrante-Schepis said. It’s more than using everyday language and laymen’s terms, which many insurers already have implemented. It also includes use of relatable visuals and attainable goals presented in a way that feels authentic (read, genuine or real) to consumers and that triggers the sense that the insurance company understands them.

Getting unstuck

There are a lot of “stuck shoppers” in life insurance, Ferrante-Schepis pointed out. These are the nearly 19 million people who do not own individual life insurance or pay for voluntary life insurance but who do value life insurance and think it’s something they should have (or have more of, if they already have employer-paid life insurance). “They may have the intention to buy, but they get stuck” and don’t buy.

What might help unstick those shoppers? Finding out was the goal of the research the two firms conducted. The answer? Bring authenticity into the communications that life carriers have with the public, whether the communications involve sales, service, general inquires or whatever.

“Consumers are waiting for the insurance companies to do it right,” Ferrante-Schepis said.

She drew a parallel to the Dove Campaign for Real Beauty, an initiative undertaken by the Dove brand of hair and skin care products to understand the images that people have of beautiful people. Over the years, the campaign has challenged the ideal image of beauty that may be pervasive but not applicable to all. It was an innovative step to engage with consumers and open up authentic conversation around beauty.

By extension, the insurance industry needs to innovate, in its own way, around the terms and concepts that it uses but that are lost on consumers.

Some of the industry’s most common terminology can befuddle consumers. Take annuity, for instance. Sixty-five percent of the survey group told the researchers that they are not confident about the meaning of that word. Meanwhile, 73 percent were not confident about the terms direct or permanent life. Guarantee stumped 68 percent, and whole life insurance, 67 percent.

What to do?

To help carriers understand and achieve authentic communication, the research team unpacked the six key elements of this type of communication. In an interview, Scott Kallenbach, research director-strategic research for LIMRA, said these elements are:

Easy to understand — Language people use everyday

Down to earth — Images that feel realistic

Memorable — Communication that is interesting

Positive — Messages that are warm and comforting

Credible — Sources of information that are trustworthy

Relevant — Communication that says the company understands them, and who they are

Consumers want life carriers to make their communications easy to understand, Kallenbach said. If the consumers are do-it-yourselfers, for instance, this will give them the confidence to move ahead.

They also want to see images and read or hear words that seem realistic and align with their own understandings. For instance, a lot of presentations picture retirement as a time of relaxing and taking vacations. But a lot of people don’t think that’s attainable. Instead, they worry about savings and nest eggs, he said.

His suggestion is for carriers to use words and images that focus on helping people achieve the retirement they want.

Concerning being relevant, the researchers found that if the consumer believes the carrier understands the customer, “that is a major motivating factor in the shopping process,” Kallenbach said. But too often, people feel that insurance companies are talking to someone else. His suggestion is to change from having a one-way conversations to inviting a two-way conversations that offer “more touch points and interactivity (and that allow) the carriers to personalize the communication.”

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].